Incorporated: 1957 as Bramalea Consolidated Developments Ltd.
Sales: $838.3 million
Stock Exchanges: Toronto
Bramalea Ltd. is a real estate company that develops and manages properties throughout North America. Its income-producing properties include shopping centers, office buildings, and residential and industrial holdings. The company also had extensive holdings in hotels, which were put up for sale in the early 1990s.
The origins of the company go back to Bramalea Consolidated Developments Ltd., first established on December 11, 1957. The new company’s avowed aim was to build a self-contained city 12 miles west of Toronto, the biggest urban center in southern Ontario. The all-inclusive community was to house 70,000 people between Malton and Brampton, two small towns whose names the company combined to form Bramalea. The vision for North America’s biggest satellite city belonged to James Sihler, a doctor in southern Ontario. He talked some of his business contacts, and eventually some British merchant bankers, into backing the project.
The bulk of the new company’s land holdings were purchased from Bayton Holdings Ltd. in 1958 and 1959, at a cost of $ 1.18 million. The plots of land themselves held mortgages worth $5.52 million. Bramalea was first listed on the Toronto Stock Exchange in August 1960, and over the next five years, the company bought up properties and property development companies. In 1966 the company sold off a 40 percent stake in Victoria Property and Investment Co. Ltd. A year later, Bramalea sold its 50 percent interest in Braemar Apartments Ltd., based in St. Catherines, around 70 miles south of Toronto.
Also in 1967, Bramalea consolidated its wholly owned subsidiaries, Bramalea Construction (Peel) Ltd. and Bramalea Shopping Centers Ltd., within the parent company. Then, in November of that year, the company incorporated another subsidiary, Bramalea General Contracting (Peel) Ltd.
By January 1968, Bramalea had established a land development division to oversee the parent company and its other land divisions. In May 1969, the company formed a joint venture with Hengran Developments Ltd. to develop land at Unionville, Ontario, cited to be named Village in the Valley. In 1975 Bramalea bought out the stake held by Hengran for just under $4.1 million.
In 1970 Bramalea ventured into the British property market after establishing Bramalea Overseas Developments Ltd., another wholly owned subsidiary. A year later, the company formed Bramalea Wescorp Developments Ltd., in equal partnership with Wescorp Industries of Vancouver, British Columbia. The new venture was to manage properties held in western Canada.
Bramalea’s first significant expansion as a property developer occurred after 1972, when the company was bought by two Toronto lawyers, Dick Shiff and Ken Field. Shiff and Field received financial support from Benjamin Swirsky, a Toronto accountant and lawyer. Rising inflation beginning in this period boosted the value of the company’s land holdings, adding to Bramalea’s bottom line and making further investments more appealing.
Shiff s and Field’s management styles were very different. Shiff, who became chairperson and CEO of Bramalea, was known as a conservative and somewhat tight-fisted corporate lawyer, while Field, Bramalea’s president, was more impulsive and outgoing. Swirsky, who became a director of Bramalea in 1976 as well as a major shareholder, offered the company his financial expertise.
One of the trio’s first big property deals was the 1975 purchase of a raft of office buildings and hotels from Trizec Corporation Ltd. for $102 million. The real estate was mainly in western Canada and featured 75 percent ownership of the Hyatt Regency hotels in Toronto and Vancouver. In 1978, the hotel in Toronto was renamed the Four Seasons Hotel.
In June 1976, the company’s name was shortened from Bramalea Consolidated Developments Ltd. to Bramalea Ltd. This followed an earlier consolidation of the following subsidiaries under the parent company: Bramco Developments Ltd., Bramalea Leasing Corporation Ltd., Bramalea Management Corporation Ltd., The Greater Cedarwood Development Corporation Ltd, Bramalea Office Buildings Ltd., Amberlea Developments Ltd., and Co-Chuk Investments Ltd.
Building a strong investment portfolio in rental income producing properties became Bramalea’s business strategy during the late 1970s. The success of this strategy was made evident in 1979 when total revenues for the company reached $138.3 million, up from $112.4 million the year before.
However, by 1980 the company was beginning to feel the effects of a sluggish North American economy, attended by high interest rates and reduced retail spending. As Richard Shiff noted in the company’s 1979 annual report: “Our overall profitability is, of course, affected by the high cost of borrowed funds. This situation will continue, and perhaps worsen in the current year.”
In 1981 the company faced recessionary conditions by unloading non-core holdings amid a high interest rate climate. First to be sold that year was Five Oaks Holdings Ltd., followed by Village in the Valley. Subsequently, Bramalea Developments (U.S.) changed its name to Bramalea Inc.
Nevertheless, during this time the company announced plans to develop four city blocks in Dallas, Texas, building “Main Center,” a project of some three million square feet of new commercial and retail real estate. Furthermore, in Denver plans were unveiled for “Trinity Center,” a two million square foot development comprising a 50-story tower and a companion 28-story building. Bramalea continued to build and manage shopping centers, which had become the company’s single largest source of rental income and earnings.
Hard times for rival property concerns offered Bramalea opportunities to buy faltering companies, including Coseka Resources Ltd., a gas and oil company in which Bramalea bought a 27 percent interest for $85.4 million. By January 1982, the company had bumped that stake up to 36 percent, and, by August, Bramalea held a controlling 52.6 percent interest in Coseka.
Also that year, Bramalea began work on a 30 acre office and retail development in Culver City, near the Los Angeles Airport. This development called for eight separate buildings to hold more than 1.64 million square feet of new space. Earnings for Bramalea fell sharply in 1982, being posted at $7.6 million, down from $12.6 million recorded a year earlier. The decline stemmed from industrial, retail, and commercial tenants scaling back on expansion plans as well as a record number of business bankruptcies driving up vacancy rates across North America.
In turn, general economic uncertainty drove down the number of new housing developments and purchases by first-time residential buyers. Furthermore, growing energy conservation and lowered oil and gas consumption during the recession affected the performance of Coseka Resources, of which Bramalea held a 62.9 percent interest by mid-1983.
In 1984 Bramalea became the target of interest from rival property developer Trizec Corporation, based in Calgary. That year, Trizec Equities Ltd. bought an initial 18 percent stake in Bramalea for $160 million. A year later, they raised their stake to 31 percent after buying 3.53 million Bramalea shares at $20 each from Richard Shiff and his family. The rival also maintained an option to increase that stake to 43 percent. Trizec shareholders then had a one-third stake in a rival property developer with more than $2 billion worth of assets in its portfolio. Specifically, Bramalea held more than 20 million square feet of retail, commercial, and industrial real estate in 95 buildings across North America. In addition, Bramalea was a community developer and home builder, and, through Coseka Resources Ltd., had oil and gas interests. The influence of Trizec’s interest in Bramalea was felt almost immediately. In August 1986, Bramalea sold almost its entire Canadian shopping center holdings to Trizec for $578.7 million, representing a net gain for Bramalea of $221.2 million.
The orchestrated profit made when Trizec purchased the Canadian holdings allowed Bramalea to refinance and restructure Coseka Resources, suffering during this time by the steeply falling price of oil on the world market. In February 1986, Bramalea suspended exploration by the company and closed the U.S. office to reduce overheads. The company was then able to write down its steep loss from gas and oil exploration to the amount of $280 million.
The shopping mall shuffle between the two companies continued when Bramalea purchased a subsidiary of Trizec, which owned 30 Canadian shopping centers, in 1986. In effect, Bramalea was buying back the shopping malls it had just unloaded as well as several of Trizec’s shopping centers. To fund the deal, the company offered Trizec 18.5 million shares in Bramalea at $25 each, increasing Trizec’s ownership of Bramalea to 61 percent.
Bramalea’s two-step transaction with Trizec lead to the formation of Trilea Centers Inc., a wholly owned subsidiary, to manage its newly purchased retail shopping mall properties. By now, Trizec’s hold over Bramalea was tightening. It installed Gordon Arnell to head Trilea, angering Kenneth Field, who resigned as co-chief executive of Bramalea and sold his share in the company for $80 million.
While Trizec gained control of Bramalea, it lost in Shiff and Field the creative force responsible for building up the company from 1973 to 1986. For Trizec, this meant a greater involvement in and responsibility for Bramalea’s growth, which Trizec didn’t necessarily anticipate. Furthermore, management at Trizec wasn’t content with being forced to part with its prized shopping center portfolio to make way for Trilea. Several disputes ensued, including one involving which computer system should be used to manage the shopping malls. While Bramalea claimed ownership of the malls, Trizec argued that as the controller of Bramalea, its equipment should predominate.
During this time, Benjamin Swirsky was named president of Bramalea. The company’s business strategy focused on drawing rental income from commercial assets like office buildings and shopping centers, and relying less on housing and land sales. The idea was to manage properties that produced long-term income, rather than looking for quick profits through property sales. Expanding rental income would come in part through renewing leases in prime properties in a buoyant economy when rents were likely to rise. But the strategy really hinged on developing or acquiring new properties.
By 1988 Bramalea’s property portfolio had reached 40 million square feet of industry, commercial, and retail space, in addition to its giant housing and land banks. Plans were announced that year to boost the portfolio to 60 million square feet over the next five years. During this period of unprecedented expansion, Trilea Centers purchased a 34 percent interest in J.D.S. Investments Ltd. by acquiring 288,000 common shares worth $30 million in the regional shopping center and office building concern, based mostly in Toronto. A month later, in January 1989, Bramalea paid $250 million to purchase the U.S.-based Marlborough Development Corporation, a house builder in the southern California region.
Benjamin Swirsky exuded confidence over Bramalea’s breakneck pace of growth, stating in the company’s 1989 annual report: “We have a clear perception of Bramalea’s growth potential. Our strategy is to select key markets where we can concentrate our expertise and effort. We know these local markets very well and the opportunities they offer.”
In 1990 the company posted revenues of just under $1.2 billion, and profits of $64 million. However, during this time Bramalea had amassed more than $5 billion in debt to fund its expansion, and, like every other major North American property developer, the company soon confronted the worst global recession experienced since the Great Depression.
By the middle of 1990, Trizec recognized that Bramalea was in trouble. Swirsky was replaced as president by Marvin Marshall, a specialist brought in from Houston-based Cullen Center Inc., a Trizec subsidiary. Marshall was faced with the challenge of selling as many Bramalea assets as possible in order to bring the company out from under a $5 billion pile of debt.
Selling more than $1 billion worth of assets a year in a buyer’s market proved a difficult task. Marshall sought to keep Bramalea from landing in the bankruptcy court, laden as it was with a daunting loan repayment schedule. Just in 1992 alone, Bramalea was forced to refinance $633 million in debt.
Among the prized properties put on the block early on was the Hyatt Regency Hotel in Vancouver, going for $95 million, and a three-quarters stake in the Four Seasons Hotel in Toronto. Early sales included a half-stake in One Queen Street East, a 403,000 square foot building in downtown Toronto. The deal, concluded in May 1991, involved the Ontario Teachers’ Pension Plan Board as buyer.
Marshall also shook up the Bramalea management. In February 1991, he brought on board Paul Campbell, a one-time manager under Marshall at Cullen Center and a former president of Campeau Corporation, a struggling Toronto-based property development concern. In April, Frank Graham, a one-time chief financial officer with Coca Cola Beverages of Canada, was appointed Bramalea’s chief financial officer. By the summer of that year, more than 350 employees, or 12 percent of Bramalea’s staff, were laid off.
Asset sales eventually arrived. An office building in Toronto, land holdings in Brampton, Ontario, and a nearby shopping center went for $90 million. And in November 1991, the company announced that it had sold a 50 percent lease on the Scarborough Town Center, outside Toronto, for around $140 million. In February 1992, the company announced a common share offering, by which Bramalea’s equity base was increased to $935 million at the half-year mark, against a figure of $884 million held at October 31, 1991. However, these funds were not enough. Bramalea suspended all dividend payments on the company’s common shares and postponed payment of interest due June 30, 1992, on the 10.2 percent debentures maturing in 1999.
The company’s restructuring plan also called for Trizec to forgo all its dividend and interest payments and to approve a plan to convert loans to equity. Among the properties to be put on the block for sale were its Edmonton office buildings, a 50 percent stake in major Canadian shopping malls, most of what it owned in Ottawa, and four out of twelve office buildings in Toronto. The company was also to sell 50 percent interests in office buildings in Dallas and Oakland, as well as commercial land sites in Atlanta, Chicago, and Los Angeles.
In July 1992, despite Bramalea’s efforts to conserve cash, declining revenue and cash flow again threatened to throw Bramalea into bankruptcy court. Bramalea defaulted on an interest payment of $4.4 million, and the grace period on the default expired on July 30 of that year.
Well-timed asset purchases by parent company Trizec saved Bramalea from bankruptcy. In September 1992, an agreement was reached between Bramalea and its creditors on its restructuring plan. The company would continue to sell its assets where possible, defer interest payments, and exchange debt for equity.
Analysts began to wonder how long Trizec would continue to help Bramalea stay afloat. A partial response came in late November 1992 when Bramalea required a $38.6 million financing commitment. Trizec balked and the commitment came instead from Carena Developments Ltd. of Toronto, which owns 40 percent of Trizec.
Bramalea Urban Properties Group Inc.; Marlborough Development Corporation; Trilea Centers Inc.; Perez Bramalea Ltd.; Bramalea Wescorp Developments Ltd.; Bramalea Leasing Corporation Ltd.; Bramalea Management Corporation Ltd.; The Greater Cedarwood Development Corporation Ltd; Bramalea Office Buildings Ltd.; Amberlea Developments Ltd.; Co-Chuk Investments Ltd.
“Bramalea Riding Out Housing Slump,” Globe and Mail, February 28, 1991.
“The Bronfire of the Vanities?” Business Week, August 10, 1992.
“How Bramalea’s Dream Became a Nightmare,” Globe and Mail, November 7, 1992.
“Mall Owners Get Retail Warning,” Financial Post, December 5, 1991.